Bullion holder launches $3.1B US hostile takeover bid

CALGARY — Toronto-based Sprott Inc. said Wednesday it’s making an all-share hostile takeover bid worth $3.1 billion US for rival bullion holder Central Fund of Canada Ltd.

The money management firm has filed an application with the Court of Queen’s Bench of Alberta seeking to allow shareholders of Calgary-based Central Fund to swap their shares for ones in a newly-formed trust that would be substantially similar to Sprott’s existing precious metal holding entities.

The company is going through the courts after its efforts to strike a friendly deal were rebuffed by the Spicer family that controls Central Fund, said Sprott spokesman Glen Williams.

Sprott is using the courts to try to give holders of the 252 million non-voting class A shares a say in takeover bids, which Central Fund explicitly states they have no right to participate in. That voting right is reserved for the 40,000 common shares outstanding, which the family of J.C. Stefan Spicer, chairman and CEO of Central Fund, control.

If successful through the courts, Sprott would then need the support of two-thirds of shareholder votes to close the takeover deal, but there’s no guarantee they will make it that far. “It is unusual to go this route,” said Williams. “There’s no specific precedent.”

Sprott did have success last year in taking over Central GoldTrust, a similar fund controlled by the Spicer family, after securing support from more than 96 per cent of shareholder votes. The firm said Central Fund’s shares are trading at a discount to net asset value, and a takeover could unlock $304 million US in shareholder value.